general david petraeus, affair and fall from grace. we have the details from inside the beltway. and find out why this traditional new year's eve possum drop is now against the law and a think of the past. "your money" starts right now. this is the economic storm of our own making and it's threatening any chance of a sustained recovery. this is "your money." i'm going to show ut damage that america could do itself if washington allows us to go over the fiscal cliff. according to studies, the average household could pay $3500 more in taxes. unemployment in the u.s. which has come down to 7.9% could head back up above 9% by this time next year. the u.s. could join europe which has been hit by a double dip recession. and according to a pugh research/"washington post" poll, you clearly understand the danger of this fiscal cliff. 68% say it will have a major effect on the economy.

21% say just a minor infect. only 2% say no effect. 10% say they don't know which is why you're watching this right now. president obama's solution to all this is to make a deal centered around increasing taxes on the wealthy which will go a good part of the way to raising the $1.6 trillion in new revenue that he wants to raise over the next decade in his attempt to reduce the federal deficit. he wants to let the bush era tax cuts expire. if that happens, the top tax rate on income would jump from 36% to 39%. he likes to say that's where it was during the clinton years. the second top rate would go from 33% to 36%. now this is what president obama campaigned on. he's been vague about the specific numbers since his re-election which suggests that he may compromise on the actual rates in order to get a deal. there are other taxes as well that he's talking about. taxes on investment gains would also go up. the capital gains tax could go from 15% to 20% and dividend

taxes would go from 15% to the income tax rate. as i showed you, 39.6%. mitt romney argue this is would hurt individuals with savings and who own dividend paying stocks. but investment gains are enjoyed by the wealthy. this, again, would target that rich group that president obama is talking about. but that's not all. the president also wants to raise an additional $500 billion by limiting the value of deductions that high income households now enjoy. and he wants to use the so-called buffet rule as a guide to future tax reform. the goal being to make sure that anyone making more than $1 million pays a minimum of 30% of their income in federal taxes regardless of what the deductions and credits are otherwise available to them. now we'll hear more directly about that from warren buffett later in the show. but this show is more about politics than economics. right now, remember that in 2010, president obama vowed to eliminate the bush tax cuts for the rich. well, he folded back then.

he loud them to be renewed for another two years. but this time he campaigned on letting them expire and fresh off his election once again staring down a republican-led house, the president is warning the wealthy that they will pay more. >> what i'm not going to do is to extend bush tax cuts for the wealthiest 2% that we can't afford and according to economists will have the least positive impact on our economy. >> now in return for the tax revenue, the president says he'll negotiate with congress on spending cuts. he claimed the cuts together with the revenues from raising taxes on the rich would reduce the federal deficit by $4 trillion over the next decade. so that's the president's plan. but without a compromise with the republicans, america could be headed over the fiscal cliff. joining me is the ceo at pimco.

mohammed, welcome back to the show. you say taxes will and should go up for the wealthy. you predict republicans in your words will "shout and scream" but ultimately they'll go along with the tax hike for the sake of avoiding an economic disaster. that was the president, not republicans that blinked in 2010. why do you think the republicans will back down now? >> i think it's different this time around. first, nobody wants to go over the fiscal cliff. as you said, this implies a recession, implies unemployment going up and shooting ourselves in the foot at a time when the global environment is much more difficult. see what is happening in europe, in the middle east and china. secondly, we just had an election, ali. the message, one of the messages of the election was one of shared responsibility and farrer burden sharing. it's a period in which the rich have done extremely well. not just on the up side, but also in terms of being protected on the down side.

>> fin finally and importantly, the economic arguments against this while they'll be valid at higher tax rates are not valid here. so if you look at the hand that president has, it is stronger than what the republicans and i think both of them will want to seek some sort of compromise. >> sounds so reasonable. let's bring stephen moore in. he is a writer at the "wall street journal." he's conservative. stephen, do you agree? are republicans ready to strike a deal with the president if it means giving up the bush tax cuts for the wealth. >> i they have dug in on this. >> i don't know, ali. i listen to this conversation. i feel like i'm living in france. i mean i just don't see any economic wisdom whatsoever in raising tax rates and an economy that is so fragile right now in a recovery that looks like it's losing steam. you saw what happened with the unemployment numbers this week. now some of that was due to the storm. but this is not an economy that is kicking on all cylinders. it is barely kicking on one cylinder. what i don't understand about what you and mohammed are saying

is how in the world do you get the economy to grow faster if you're going to raise tax onz businesses? you're going to raise taxes on investment? >> the issue is compared to what? >> exactly. >> you don't want taxes on the troich go up. >> right. >> compared to the risk of a fiscal cliff, do you think republicans in the house will look at that and say we don't want to incur the wrath of the american people if we go over this fiscal cliff? >> look, mohammed may be right about the politics of this. what i want to talk about is the economics of it. i'm saying it's insane. it is so dangerous to be talking about -- i mean explain this to me. how do you raise taxes on businesses and it frees up more jobs. >> it is really insane to go from 36% to 39.6%? i would say going from 36% to 59.6%. i'm not an economists. i'm just saying is that really insane? might you have heard in the president's comments in the last week the possibility of compromise? you know, he stopped talking about this 39.6%. i don't know if i'm the only one

who noticed this. >> what we want is do is lower our tax rates to be more competitive. i don't see any economic wisdom in it. i covered this in the editorial in the "wall street journal" this week. the period is when the economy has really grown is when we've been cutting tax rates. here's the one last point if i may. i listen to that whole press conference the president gave the other day. and here's what struck me. i didn't hear one time talk about cutting government spending. >> come on. you went to the soda machine if you didn't hear it. i agree with you. he was vague. he was a little unspecific. but he did say it's time to take a hard look at entitlements and spending. i would agree the criticism -- >> he didn't put anything on the table. he's never put anything -- this has been four years of this president. what spending cuts? they're not in his budget. they've never been in the budget. here we are opening up a new session. i'm suspicious that those cuts are ever going to come. >> you are suspicious that they're going to come? i kind of get everybody in the world now gets this issue. i imagine i could go down to the

corner store and somebody could design something to avert the fiscal cliff. they get that taxes may have to go up on the rich. whether or not you agree with it. and they get that spending has to be cut. >> so i think they're going to come. i think we'll see reforms both on the tax side which is base and rates and on the expenditure side. a couple of issues. you say we like france is like those who say we like greece. we're neither like france. we're neither like greece. we're the united states of america. and i agree with stephen that we need to invest in our growth engines. but that is going to materialize if we deal with fundamental issues. it's not a tax rate of 36 or 39. a fundamental issue is we haven't invested enough in our people, in our plot, in our equipment and infrastructure. it's critical that this fiscal cliff debate not crowd out the issue that we as a nation have

three distinct problems. too much debt, too little growth, and too dysfunctional political system. and we need to address all three in a wholistic manner. i don't think the difference between high growth and low growth is a tax rate of 36% or 39%. it is much more whether we are enabling our citizens and our companies to produce and to prosper. >> i think we're actually agreeing. infrastructure, private-public partnerships, too much debt, too little growth is what the problem is. if we don't get a handle on that, then in ten years we may be sitting here thinking that we're a little more like greece. okay, guys, good to talk to you. >> i don't want to be like greece or france. believe me. >> we all agree on that point, too. good to see both of you. mohammed and stephen, thank you. we'll be right back. allen greenspan ended a nearly two decade run as federal reserve chairman in january of

2006. the economy was strong but the seeds for the 2008 financial meltdown had been planted. >> the actual currency in 2008 surprised me with respect to the size of what the problem was. >> so how would allen greenspan handle the kurpt threcurrent th economic storm? the former fed chairman speaks to me about the fiscal cliff, the bush tax cuts and why he wouldn't let the u.s. slip into a recession to solve america's long-term debt problems. a rare interswru allen greenspan up next. [ male announcer ] it's simple physics...

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but they haven't experienced extra strength bayer advanced aspirin. in fact, in a recent survey, 95% of people who tried it agreed that it relieved their headache fast. visit fastreliefchallenge.com today for a special trial offer. alan greenspan had a front row seat of the biggest economic events of the last 25 years. when he was head of the federal

reserve, it was 1987. ronald reagan was in the white house. over 18 years greenspan led the central bank of the world's chargest economy through good times and bad. now six years after he's left the job, his successor ben bernanke is warning of the danger of plunging over the fiscal cliff. i've been warning you about the catastrophic effects that could have on america's already fragile recovery. but some say that it's fear mongering. i spoke with allen greenspan who was in washington at a peterson foundation event to discuss the fiscal cliff and i asked him point blafrpnk, do you believe u.s. can go in a recession as a result of the fiscal cliff? >> most certainly. remember, all the forecasts come off models which didn't catch the 2008 crisis. and so you have to be very careful about using them to evaluate this type of problem. >> the last time washington faced the expiration of the bush era tax cuts in 2010, you said in interviews they should follow

the law and let them expire for everyone. now putting aside the other parts of the fiscal cliff, do you still feel that all americans should see their income tax rates rise? >> i say that this crisis is going to be extraordinarily difficult to resolve. in other words, the crisis i'm referring to is not the fiscal cliff crisis but the broad crisis with respect to debt. we have had a rise in spending on social benefits. and as i mentioned before, this is both republican and democrat and neither one of them get a hold on this. what the data clearly shows is as social benefits rise, the savings, the domestic savings of the american economy declines. that is basically the source of funding for capital investment

and capital investment is where productivity comes from and productivity is where economic growth comes from. so unless and until we recognize that we got to slow the pace and in fact reduce the level of benefits to allow savings to come through, that will create the type of economic growth which will enable us to fund the social benefits. we're running into a stonewall here in which more social benefits we have which we don't contain, the lower the rate of savings, lower the rate of growth, and a lesser quantity of real resources to fund the benefits. this is obviously an unsustainable situation. it the sooner we come to grips with it the better. i raised the issue of allowing the bush tax cuts to recind on

schedule was not that i want taxes to go up. i think it's a terrible idea. relative to what? i mean if we don't close this deficit fairly quickly, we are in real trouble. remember, it's always easier to cut taxes politically than it is to cut spending. so if you have to allow a significant rise in taxes to essentially cut a deal on a major benefit cut, that's a good deal for me. it's always easier in the future to cut politically cut taxes than it is to cut spending. >> so let me ask you this. if we can get to that 3% growth to 4% and beyond, then you've got -- it becomes a virtuous cycle. can that happen? would the immediate spending cuts that we are looking at now help get us there?

>> look, imf studies show definitively that if you cut spending in a situation like this, it does lower the gdp but nowhere near the amount and increase in taxes lowers the rate of increase in gdp. so that i think if we have to have a moderate recession to solve this huge fiscal problem that's if front of us, i think there is a very small price to pay. because we're not going to get out of this thing without paying it. there is a presumption here that we have a whole schedule of economic policies which can just basically solve the problems and return to a normal situation. it is not. this is an extraordinarily unprecedented situation and unless and until we reign in the spending growth, this economy can't function. >> the economy can't function. so he's saying a little

recession is better than the idea of raising taxes on everyone. a fascinating conversation with the former fed chairman. can you hear more of it on cnnmoney.com. this country's fiscal house needs to be put in order. the president says you do it by taxing the rich. so does warren buffett. coming up next why the taxman must come for all of us. the wheels of progress haven't been very active lately. but because of business people like you, things are beginning to get rolling. and regions is here to help. making it easier with the expertise and service

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at meineke i have options... like oil changes starting at $19.95. my money. my choice. my meineke. there's a key theme of the president's re-election campaign. the rich need to pay more and the middle class must be spared. in fact, the president made the case again this week. >> if congress fails to act by the end of this year, everybody's taxes will automatically go up. including the 98% of americans who make less than $250,000 a year. and the 97% of small businesses who earn less than $250,000 a year. that doesn't make sense. our economy can't afford that right now. >> now arguably talk like that separating the rich from

everybody else got the president another four years. so now i'm going to take a politically unpopular position. the middle class is not paying its share. yes, you. your taxes must rise. now before you throw your remote at the tv set, just hear me out. our debt is on an unsustainable path. the nonpartisan congressional budget office says that if we avoid the fiscal cliff and nothing changes, take a look at this. this is the relationship between debt and gdp. u.s. debt will be the equivalent of 93% of gdp by 2022. that is ten years from now and nearly 200%, double. everything that we do in this economy by 2037. basically, we could end up like greece. now to fix it, we need more revenue. not just from the top 2%. your politicians have not told you the truth about this. so i will. soaking the rich while quite possibly necessary simply doesn't provide enough revenue to close our massive budget gap.

the middle class is where the money is economically speaking. it's where most of the money should be, by the way. even if you confiscated, and i'm not suggesting this, but even if you confiscated 100% of the income of families making 250,000 a year, you would only getted 2 e$2 trillion. the middle class cannot be exempt if we're going to dig out of this hole. now letting the bush tax cuts expire for everyone would raise over $4 trillion in revenue over the next decade. putting us on a more sustainable path. i know we're in a fragile economy right now. we're in a fragile recovery. and raising taxes on the middle class could hurt. could even mean a brief recession. but i'm talking about putting the communal interests over your self interests. we're near historic lows. a tax policy center estimates that a median income family of four has an effective tax rate of just 5.6%. that is the lowest -- the lowest

since the 1950s. i'm suggesting -- i'm not suggesting a massive tax increase. there is definitely room for taxes to rise and our collective future may well depend on it. joining me now is robert reich, director of public policy at uc berkeley and former secretary of labor under president clinton. he is also the author of the book "beyond outrage: what has gone wrong with our economy and our democracy and how to fix it." bob, good to see you. we need to raise taxes on the middle class for the good of the nation. tell me why i'm wrong. >> i have great respect for you, ali, but you're dead wrong. i think you're wrong on a number of counts. number one, the middle class, i mean the median income in america right now is about $52,000 per worker. family income is about $55,000. that's been declining. the middle class actually is 8% less, the typical middle class

family 8% lower wages than it had in the year 2000. you know, it's been paying more taxes, not less taxes if you consider sales taxes which have gone up dramatically. you consider social security taxes which go up the last 20 years. you consider property taxes. i mean middle class is paying out their ears with regard to taxes. and finally, the middle class is critical to a recovery. i mean that's where the demand in the economy comes from. they are the job creators because it's their spending that actually creates incentives. you don't want to put an added tax burden on the middle class. >> look, liberals want to protect the most vulnerable in society by insuring unemployment benefits and housing stamps and heating assistance. but if you exempt the middle class from paying more for these things, are you not setting in motion the ultimate demise of that safety net because there won't be enough money to pay for it if we don't somehow get economic growth? >> no. first of all, most middle class

people don't take advantage of the programs, the safety net programs you're talking about because most middle class people, you know, if they're earning $50,000 a family, they don't need those safety nets. those safety nets are in case somebody actually falls out of the middle class. but more importantly, the wealth gli this country, the top 2%, 3% have never been as wealthy. they're now taking home, if just look at the top 1%, over 20% of total income. so look at the top 5%, they're taking home close to 28 to 30% of total income. that's where the money is. they're not spending it. it's not as if the economy needs their spending to keep going. to be rich means you've already got most of what you want. they're the ones who save. and their savings ordinarily are good for the economy. but in a global economy, their savings go around the world to wherever they can get the highest return. that's where we ought to be taxing. their tax rates have

dramatically declined. you know, before 1981, the top marginal tax rate in this country was 70%. >> right. >> and now it's 35%. >> i hear you. >> if you look at -- but wait a minute. this is important, ali. a lot of wealthy people actually pay the capital gains rate of 15%. >> right. >> on most of what most of their income. so that's where we ought to raise taxes. >> i'm not arguing that we should raise taxes on the middle class in instead of raising it on the rich. i'm saying that because president obama doesn't have to run again in a re-election, doesn't give him the perfect opportunity to level with the american people and tell them that going after the rich alone simply won't do it in terms of revenues? >> you're making a bugaboo out of the deficit. i think the most important thing in the foreseeable future is to get jobs back, to get the economy growing. we don't want to raise taxes on middle class. we don't want to cut government spending until the economy is really back to at least 6% unemployment or less, at least 3% growth or more.

i mean it would be -- >> fair enough. bob reich, always great to see you. i have great respect for you as well, you know that, right? >> i do. >> always a pleasure to see you. robert reich, former secretary of labor. republicans cannot compromise on raising taxes. why? because of this man. most republicans in congress signed a pledge to never raise taxes or else. but with the fiscal cliff looming, it could be over for grover? i'll introduce you to two gop congressmen willing to break the pledge next. [ male announcer ] this is steve. he loves risk. but whether he's climbing everest, scuba diving the great barrier reef with sharks, or jumping into the market, he goes with people he trusts, which is why he trades with a company that doesn't nickel and dime him with hidden fees. so he can worry about other things, like what the market is doing and being ready, no matter what happens,

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the most immediate threat facing the country is the fiscal cliff and the election results did nothing to change the balance of power we've seen. a democratic president calling for taxes on the richest americans to rise is staring down a republican-controlled house of representatives that opposes any increasing taxes

whatsoev whatsoever. it's a showdown that demands compromise. they all have to give something up for the greater good. almost all the republicans in congress have signed a pledge not to vote for any net tax increases under any circumstances. it's the pledge authored by grover norquist, founder and president of americans for tax reform and its states. one, oppose any and all efforts to increase the marginal income tax rate for individuals and businesses and, two, oppose any net reduction or elimination of deductions and credits unless match dollar for dollar by further reducing tax rates. i'm joined by scott rigil and steve leteret. you both signed the norquist pledge when you came into office like most republicans but now turned your backs on it. you both have your own justification. you're saying that our fiscal problems are too large and too dangerous to not consider every option. thank you for being with us,

gentlemen. congressman, investor and supporter of warren buffett only made one political donation to a republican this season. and it was to you. >> even though he signed that grover norquist pledge about taxes, he decided that more important his pledge to the constitution than any pledge to grover norquist. he disavowed it. i admire that a lot. i admire him. so i sent him a check. >> all right. we'll hear more from warren buffett later in the show. congressman, did your decision to break from the pachl pair protection pledge damage your campaign for re-election in terms of fund-raising and support from big money doaners? >> no, it did not. the second district sent a businessman to washington. i go where the numbers lead me. and a careful analysis of our budget and trying to reconcile that with the americans for tax reform pledge led me to the clear decision that the pledge itself is an impetment to

meaningful tax reform and also our tax code now presently yields just under 17%. we haven't run our country on that yield since 1959. and that's a long time ago before medicare and medicaid were even on the table. so revenues have to come up. expenses have to come down. and i'm asking our friends on the other side of the aisle to help us on the expense side. >> congressman, you decided not to seek another term in the house specifically because of that polarizing climate around the fiscal crisis. i want to read our viewers what you wrote on monday. we have a paralyzing gridlock in washington even as we stair into the jaws of incredibly serious challenges as a nation. it is time for republican soul searching. it's time for grassroots republicans all across the country to recognize that they have been manipulated by the special interests. congressman, would that kind of soul searching be a priority for those in congress who now live in this perpetual campaign mode? it is difficult for you guys because you're constantly campaigning. >> yeah, you know, i signed the

norquist pledge in 1994, october 1994. 18 years ago. and it's a different world. and so the pressures that our colleagues face are different than the ones i faced in the '90s with the explosion of the internet and quite frankly 24-hour cable news programs. and it is a constant campaign. but i think that that poll that you cited, we also commissioned a survey and the numbers are about the same. and people, you know, people will make a mistake going forward saying that if the president says yeah i have a mandate to do what i want or republicans say it's my mandate we got re-elected, they sent the same bunch back to washington. so it looks like they voted for gridlock. if you go underneath the numbers, what they voted for is they want both sides to work this thing out. >> congressman, rigil this is an interesting point. you made it earlier. compromise does require everybody to give up something. the problem with the republican position is that it was such a hard line to not budge on. so i suppose republicans -- democrats can move both on tax

rates and on expenditures. but in a post election survey conducted by pugh research concerning the fiscal cliff, 53% of respondents said that republicans in congress would be more to blame if we went over it. 29% placing blame on president obama. so at this point do you think if some of your colleagues on the republican side were to disavow the pledge, the public would hold republicans less responsible for anything that goes wrong with the economy. >> as you look at the total package, what has to happen, we've got to address our fiscal situation. i appreciate congressman's emphasis on this. while we're facing a fiscal cliff here and it's a very serious one, the real problem, the underlying problem is the 700 point delta that we have between revenues and expenditures that threatens the foundation of our country. >> right. >> let me bring in the congressman on that. you're okay with raising taxes to fix the problem. but how far are you willing to

go? would you turn down the kind of budget slashes that paul ryan wants to make? are you just budging on the tax side? >> well, no. here's the deal. the number that i would throw back to you is in the survey that we included, 35% of republicans said they would forgive their member of congress, republican member of congress if they voted to increase tax rates as long as the increase revenue went to solve the problem, not to go to more spending. and i think that that's the key. but i agree with scott. the president's sort of made fun of mitt romney's five-point plan. but i tell you what, if the democrats are willing to give on tax simplification which has increases for some people, not in the marginal rates, but some people will pay more taxes, and they then bring a serious proposal to the table on entitlement reform, there's a deal that can be had. i think they indicated they're willing to give that a shot. >> very good, gentlemen. thank you very much for joining us both of you. thank you for your work on behalf of the american people.

well, even if we avoid flying off the fiscal cliff, economic slowdowns in europe and asia could still push this economy over the edge. what president obama can do in his second term next. ♪ hi dad. many years from now, when the subaru is theirs... hey. you missed a spot. ...i'll look back on this day and laugh. love. it's what makes a subaru, a subaru. at e-trade, our free online tools and retirement specialists can help you build a personalized plan and execute it with a wide range of low cost investments. get a great plan and low cost investments at e-trade.

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president obama confronted major challenges during his first term. he is bound to be dogged by them in the second term. first, a crisis that led to a double tip recession in europe. the euro zone fell back into recession in the third quarter. that the second time since the financial crisis began in 2009. modest growth from nations like france and germany couldn't make up for a slump across europe.

unemployment climbed as high as 25%. in countries like spain and greece. that's the official unemployment rate. president obama will need to focus on this coming storm as it threatens america's shores for the u.s. stakes are too high not to get involved. now the u.s. and the eu trade $700 billion in goods and services a year, making it the world's biggest trading relationship. what's more, that financial crisis in europe has resulted in an economic slowdown in asia which takes us to another foreign policy challenge which is china. trade between the world's two largest economies grew to $531 billion in 2011. but economic output in china has fallen to just 7%. right when u.s. firms like gm and caterpillar are expanding their presence there. president obama will need to mend relations with the new leadership emerging in beijing. that after a wave of china bashing during the election campaign in which americans accuse china of stealing

american jobs through currency manipulation or outright theft of intellectual property. closer to home, the president will have to address ties with america's immediate neighbors. last year the obama administration blocked an extension to the keystone excel pipeline that would help deliver oil from canada's tar sands, eyely controversy bull productive sands to the gulf of mexico. largely on environmental grounds. now the state department is reviewing the pipeline route. the pipeline will likely get approval and get built. either way, the energy relationship between the u.s. and canada will continue to grow. and while president obama meets with his newly elected mexican counter part this month, a major topic will be obama's goil goal for immigration reform. it's a domestic issue with regional economic implications for both the united states and mexico. so president obama has got a lot to think about. joining me now is fareed zakaria. he is host of "gps."

you understand the economy and foreign affairs. let's talk about europe first of all. you get the impression that china was the biggest economic threat to the united states. but if europe doesn't get its act together, the trade between europe and the u.s. is greater. should the president be worrying about that more? >> he's worrying about it. look, there is no danger of a lehman like collapse in europe because the european central bank finally has essentially copied the federal reserve. and has provided liquidity. so no crisis, no crash. what instead has happened is the slow motion cross-ice chisis whw growth. they closed buget deficits but the result is the economy is in a tailspin. obama can't do much though because welcome to the post american war. the europeans don't want to hear anything from the americans. tim geithner the secretary of treasury tried to give them a few lectures about austerity. they said thank you but no

thanks. this is the first international economic crisis. the crisis of the european union in which the united states is not a central player. since really the 1920s. it is a new world. the europeans think hey, we're big boys. the eu economy, as you know, ali, is larger than the u.s. economy. so i think what's going to happen is president obama is going to watch very anxiously because as you say it does have a huge impact. i don't think there is much he can do about it. >> that's why they don't talk about it much. in europe, we're mostly worried about the economy. the foreign policy issues are not as serious n china, there are a number of issues. one are the economic issues that i talked about. low wages, currency, manipulation and intellectual property theft and those thins. then there is the other issue which is the china and u.s. do not see eye-to-eye on the other issues that the world is facing right now. >> you're exactly right. the economic issues, i think fundamentally can be dealt w i think that as often happens when

you deal with trade related things in a campaign, everything that is said during the campaign about a mern presidential campaign should be thrown into the garbage can. >> the chinese probably understand that. >> one hopes that the chinese are sophisticated enough. the system even in china is becoming more open and more transparent. maybe the leaders understand. that the people on the street don't. >> right. >> and they listen to mitt romney. and that has an effect. if you watch the twitter and social media phenomenon in china, they responded very negatively to the american campaign. they say china has been turned into the scapegoat. >> let's talk about what's going on in the middle east. this situation is heating up increasingly between israel and the leadership in gaza. what's your sense of how this affects what president obama has to do? >> it's not really a war. israel will win if there is a lopsided war. you have a powerful machine in the middle east and then you have gaza that has a few

rockets. that's a tactical move tt the israelis have undertaken. understandable because of the rocket fire they faced. but what is the long term strategy? what are they going to do about gaza? they tried to economically choke it off, it didn't work. they tried this military operation before including a ground invasion. didn't really work. where are they going here? and that's where the united states can be helpful. >> fareed zakaria, always a pleasure seeing you. one of the richest men in the world says i may have to go dress shopping in a few years. maybe help help me get something nice. warren buffett is on the show next. ♪ announcing the all-new 2013 malibu from chevrolet. ♪ with a remarkable new interior featuring the available chevrolet mylink infotainment system. this is where sophisticated styling begins. and where it ends? that's up to you. it's here -- the greatest malibu ever.

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when warren buffett talks,

wall street listens and so does washington, so do some of you. poppy harlow got an exclusive interview with warren buffett. he's been out spoken in the past about taxes and what the rich should pay. what is he saying now that it's on the front burner with the fiscal cliff. >> i was sort of shocked by his answer. he really wants to see president obama take an incredibly hard line in these negotiations with republicans. doesn't want to see him back down. and frankly, he doesn't think closing loopholes. even a lot of them, is enough. he wants to see higher taxes period. here's his take. >> we need to get our revenue up to about 19% of gdp. we need to get our expenses down to 21% or 20.5% of gdp. everybody knows that. we're a long way from 19% and we're a long way from 21.5% so it's going to take significant action on both sides. at one point, $1.6 trillion

happens to be 1% of gdper. we'll need that much. >> what is the likelihood of the united states falling into a recession if we go over the cliff? >> i don't think it's going to happen. i think if we go past january 1st, i don't know whether it will be january 10th, but we're not going to permanently cripple ourselves. >> even if we go over for two months, does it dip this economy back into a recession? >> i don't think so. >> so ultimately, the ultimate discussion about the economy has to lead to dwroegrowth and jobs. did he say anything about that? >> of course he did. you have been hammering away at the 12 million jobs issue. we talked to him about jobs. buffett is more optimistic than most people. i want you to hear our exchange. >> both president obama and

governor romney's camps put out there that their plans could feasibly create 12 million jobs over the next four years. my colleague ali velshi has been hammering away at this, saying that math doesn't add up. it's tough to do that and see that happening. do you think that's at all realistic? >> people toss around numbers in cap pains. it's silly to say this will create 2 billion jobs or this will cost 8 billion jobs. they don't know. it will get them in the papers, get them on television, but what will create jobs in this country are the same things that have created for the last 200-plus years. the american economy works very well. we went through one of the great financial panics of all time. and we have been coming back from that, and we'll continue to come back from that. but it doesn't happen in a week or a month when you have this sort of cataclysmic panic we

had, really, particularly in the financial world. but it was housing induced bubbling that popped. >> looking at the economy as it stands right now and looking at what we're facing, is it at all feasible to get 12 million jobs creating in the country in the next four years? >> i don't think it's impossible, but i don't think there's any magic wand. i don't think it's impabl. that would be 250,000 a month. we have had periods when that has happened. we're coming back, so 12 million sounds like a stretch, but i don't think it's impossible. the economy is getting better. >> not impossible, but a stretch. i asked him do you think it's irresponsible for candidates to make promises like this? and he told me, people in campaigns say a lot of things. of course, they're campaigning to be president. but i know, ali, you're going to wear a dress if it happens. so i'm going to take you dress shopping in omaha and maybe warren will come. >> it's not a punishment.

if it happens and i have to wear a dress because someone created 12 million jobs, it will be a happy occasion. it's a really good and worthwhile conversation, particularly to those of you who are investors who want to know how warraen wafft sees the future. >> my closing argument after the break. ç< americans believe they should be in charge of their own future. how they'll live tomorrow. for more than 116 years, ameriprise financial has worked for their clients' futures. helping millions of americans retire on their terms. when they want. where they want. doing what they want. ameriprise. the strength of a leader in retirement planning. the heart of 10,000 advisors working with you one-to-one.

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it's changing the conversation. shopping fdon't wait. coverage? open enrollment ends december 7th. now's the time to take action. call unitedhealthcare today. you heard it from warren buffett. taxes are going up for rich. that alone won't be enough to tackle our monstrous debt. we can't afford to keep the bush tax cuts for everyone, but who else gets hit. allowing the tax cuts to expire for everyone, would slow growth in the short term, but in the long term, the danger is much greater. you can find m